Digital Business, Software Drive IT Spending Growth

Global spending on information technology is expected to reach $3.5 trillion this year, up 2.4% from 2016, fueled in part by the rise of new cloud-enabled digital platforms such as the Internet of Things and smart machines, according to IT research firm Gartner Inc.

The gains will extend into 2018, growing 3.5% to $3.6 trillion by the end of the year, the firm said Thursday.

Its latest forecast is based on an analysis of sales by thousands of technology vendors worldwide, across a range of IT products and services.

The analysis shows the market for enterprise software, which enables companies to leverage an array of emerging digital-business capabilities, is poised to grow 7.6% over last year, to $351 billion, the fastest growing segment of total IT spending.

Spending on enterprise software, including cloud-based software-as-a-service apps, will accelerate in the year ahead, hitting $381 billion in 2018, a 8.6% increase from 2017, the firm said.

Spending will also rise for computers, tablets, mobile phones and other devices, as well as IT services, communications services and data center systems, though at a slower pace than software.

Within the devices segment, which is forecast to grow 3.8% this year to $654 billion, mobile phone spending will get a boost from increased average selling prices for premium phones tied to the 10th anniversary of the iPhone, the firm said.

The single largest share of total IT spending continues to go into communications services, which is expected to attract $1.3 trillion in spending in 2017, and $1.4 trillion in 2018.

“Digital business is having a profound effect on the way business is done and how it is supported,” John-David Lovelock, the firm’s vice president of research, said in a research note.

He said “next-generation” tools fueled by business and tech platforms, such as the Internet-of-Things in manufacturing or blockchain in financial services, are driving “new categories of IT spending.”

The latest forecast revises Gartner’s earlier projected IT spending growth rate of 1.4% for 2017, reported in the previous quarter, taking into account the U.S. dollar’s subsequent decline against many foreign currencies, the firm said.

Morgan Stanley last month projected a 4.9% increase in 2017 corporate IT budgets, up from average budget growth of 4.4% over the past three years.

The results were based on a survey of 100 chief information officers and other IT managers at U.S. and European firms in a range of industries, most with more than $1 billion in annual revenue.

Like Gartner, the bank’s forecast spending gains were led by software and driven by digital transformation initiatives, with cloud computing, security software and analytics as top spending priorities.